Gem gears for Ghaghoo Mine opening

Brian Benza | Thursday March 20, 2014 12:41

CEO Clifford Elphick announced this week that the company’s strategy in 2014 is to focus on bringing the $96 million (P854 million) Ghaghoo into production and continued development and expansion of operations at Letšeng in Lesotho.

This year, the company’s secondary growth strategy will also involve maximising revenue and margins from rough diamond production by expanding sales and marketing.

Gem Diamonds aims to ramp up to planned phase one production rate of 200,000 carat per year to 220,000 – extracted from 720,000 tonnes of ore by the end of the year.

“With the kimberlite now intersected and the development of the mining tunnels taking place, the completion of phase one of the project is in sight,” Elphick said. He stated that the main decline reached 50m from the break-off to the first production level last February.

“It is very satisfying to see that the advance of the decline shaft through difficult and dangerous conditions has taken place on time and within budget,” he said.

The mine, which is in a remote area characterised by shifting sands and rough roads has established effective operating mining support infrastructure, a camp, a treatment plant and other facilities. By December, Gem Diamonds had spent $71.2 million of the total capital budget for Ghaghoo and the group had, in January, finalised a $25-million nine-month unsecured loan facility through Nedbank Capital for the remaining capital spend.

This facility was due to be refinanced through a longer-term debt prior to its expiry in October. Gem Diamonds acquired rights to Ghaghoo from De Beers and Xstrata in 2007 for US$34 million vowing to bring the long-known diamond deposit to commercial production.

Studies estimate that Ghaghoo has a total carat resource of 20.5 million carats at an average of $162 per carat with a total in situ value of $3.3 billion.

Elphick said that in 2014, Gem Diamonds intends to pursue diamond manufacturing and partnership arrangements down the diamond value chain.

Gem Diamonds reported that its revenue rose five percent year on year to $213 million in the fiscal year that ended on December 31. The increase resulted from improved rough diamond prices and higher polished sales. The group posted a profit of $38.2 million for the year compared with a loss of $77 million one year ago.

The company noted that during 2013, the rough diamond market saw less volatility than in recent years. Top prices were achieved for Letšeng’s production, particularly high-quality, large diamonds. The company sold 97,294 carats of diamonds from Letšeng for an average $2,043 per carat, up from $1,932 per carat the previous year.